Federal bonds rose to one-month highs after the central bank chief said supply rather than demand factors were behind a recent spike in inflation, hinting there were no plans to raise interest rates now, while the rupee edged up on tepid demand for dollars.
The top 30-share Mumbai Stock Exchange index fell 0.36 percent to 5,117.01 points after rising 2 percent in the previous three sessions, but gainers outpaced losers 1,116 to 658. The benchmark index gained 1 percent on the week.
"The lower oil prices are a relief, but the truckers' strike is a worry now, as it may affect industrial production," said Kisan Choksey, chairman of KRC Shares & Securities Ltd.
"The undertone is good, but investors, particularly funds and foreign institutions, are hesitant because of this negative."
Official data on Friday showed wholesale price inflation had eased marginally to 7.94 percent in the year to August 14 from a 3-1/2-year peak of 7.96 percent a week before, but the figure was above a median estimate of 7.83 percent in a Reuters survey.
Foreign funds have sold a net $39.7 million worth of Indian shares so far this week, and truckers have threatened to intensify the week-old strike, which could pinch economic growth.
US light crude was trading some $6 below last week's record high of $49.40 per barrel, boosting refiners. State-run Indian Oil Corp rose 3.1 percent.
But the chairman of Bharat Petroleum Corp, another state-run refiner, told Reuters the truckers' strike would lead to lower demand for fuels in August, leaving the stock unchanged.
Auto makers also fell on concerns about disrupted despatches. Tata Motors, the biggest truck and bus maker, slipped 1.8 percent and top motorcycle maker Hero Honda Motors fell 0.8 percent.
Metal and software services stocks slid on profit-taking. Top aluminium maker Hindalco Industries fell 2.5 percent and Tata Consultancy Services, the top software services exporter, fell 1.7 percent after debuting strongly on Wednesday.
The yield on the 10-year benchmark bond closed at a one-month low of 6.0657 percent, a sharp 19 basis points lower than its previous close.
It last ended lower at 5.9438 percent on July 27, before strong US economic data led to fears about rising global interest rates and their impact on Indian rate policy.